A RTICLE XX GATT

With this rigorous approach to Article III.4 GATT, Article XX GATT is conferred upon the role of protecting policy space for legitimate regulatory measures. Under Article XX GATT, a potential infringement of Article III:4 GATT – and also of Article XI GATT which prohibits (quantitative) trade restrictions - evoked by a (production related) CSR measure can be justified in case it is necessary to pursue legitimate policy objectives such as (a) the protection of public morals, (b) the protection of human, animal or plant life or health or (g) relate to the conservation of exhaustible natural resources. Here again, the question whether these policy objectives can also be related to activities or situations outside the importing State’s territory has been the subject of a controversial debate.

Opponents of an extraterritorial application in particular of Article XX(a) and (b) still base their opinion on the early Tuna Dolphin I rulings where the panel held that Article XX(b) does not cover extra-territorial measures such as the protection of dolphins outside US territory.

Proponents of the admissibility of CSR regulation related to situations abroad, invoke in particular US - Shrimp-Turtle⁴⁰ where the Appellate Body regarded the US importation requirement that shrimps have to be harvested under conditions that do not adversely affect sea turtles (an endangered species) to be justified under Article XX(g) as long as good faith efforts were undertaken with a view to the adoption of an international standard in this regard. The Appellate Body stated that it would not ‘pass upon the question of whether there is an implied jurisdictional limitation in Article XX(g), and if so, the nature or extent of that limitation’ as in the specific circumstances of that case, there was ‘a sufficient nexus between the migratory and endangered marine populations involved and the United States for purposes of Article XX(g)’.⁴¹ Thus, as the Appellate Body referred to the fact that the protected turtles also traversed US waters, strictly speaking, the ruling did not concern a (purely) extraterritorial issue.⁴² Moreover, the protection of exhaustible resources under Article XX(g) has generally been interpreted as less restrictive than the other justifications.⁴³

As the very idea of the US measure was the preservation of an endangered species as such and not of domestic turtles, this decision has nevertheless been interpreted as permitting extraterritorial production measures at least as far as environmental protection is concerned; which has been regarded as being in line with the fact that environmental degradation or pollution is a globally interrelated and transboundary

40 US – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R.

41 ibid., para. 133.

42 For detailed analysis of case law and discussions, see in particular Charnovitz (n. 17), at 92 ff., 99 ff. See also Howse and Regan (n. 14).

43 See Charnovitz (n. 17), at 92 ff.

issue.⁴⁴ In contrast, the potential justification of CSR standards relating to purely domestic health and safety issues or the protection of human and labour rights under Article XX (a) or (b) remained contested.⁴⁵

(b) The Impact of EC-Seal Products

In EC - Seal Products, the European Union initially justified the importation and marketing ban on seals products with public concerns about seal killing (methods) under Article XX(a) and (b). The Appellate Body, however, considered only Article XX(a). It upheld the Panel’s finding that the EU regulation was necessary to protect public morals within the meaning of Article XX(a) although the public morals were (also) concerned with the protection of extraterritorial seals. With regard to the exterritorial issue, the Appellate Body held that ‘[a]s set out in the preamble of the Basic Regulation, the EU Seal Regime is designed to address seal hunting activities occurring "within and outside the Community" and the seal welfare concerns of "citizens and consumers"

in EU Member States. The participants did not address this issue in their submissions on appeal. Accordingly, while recognizing the systemic importance of the question of whether there is an implied jurisdictional limitation in Article XX(a), and, if so, the nature or extent of that limitation, we have decided in this case not to examine this question further.’⁴⁶

The general approach towards Article XX(a) is first, to examine whether the objective of the measure falls within the scope of protection of public morals and second, whether it is necessary, which includes a weighing and balancing of the relative importance of the interests at stake, the contribution of the measure to meeting the objective, and the trade restrictive impact of the measure; also, alternative measures to achieve the same objective are analysed.

With regard to the highly contested issue whether the European ban falls within the scope of public morals (and prevents harm to European citizens), the Panel had held that ‘Members should be given some scope to define and apply for themselves the concepts of “public morals” in their respective territories, according to their own systems and scales of values.

… [W]e are nevertheless persuaded that … animal welfare is an issue of ethical or moral nature in the European Union. International doctrines and measures of a similar nature in other WTO Members … illustrate that animal welfare is a matter of ethical responsibility for human beings in general.’⁴⁷ This wide interpretation of public morals was upheld by the Appellate Body: ‘Members have the right to determine the level of protection that they consider appropriate. … Members may set different

44 See Howse, Langille and Syke, ‘Pluralism in Practice’ (n. 32), 124 ff.

45 On these, see MJ Trebilcock and R Howse, ‘Trade Policy & Labour Standards’ (2004-2005) 14 Minnesota Journal of Global Trade 261.

46 EC – Seal Products, WT/DS/400/AB/R, WT/DS 401/AB/R, para 5.173.

47 EC – Seal Products, WT/DS/400/R, WT/DS 401/R, para. 7.409.

levels of protection even when responding to similar interests of moral concern … [W]e do not consider that the European Union was required by Article XX(a), as Canada suggests, to address such public moral concerns [slaughterhouses and terrestrial wildlife hunts] in the same way.’⁴⁸ Thus, the Appellate Body was convinced ‘that the principal objective of the EU Seal Regime is to address EU public moral concerns regarding seal welfare, while accommodating IC [indigenous communities] and other interests so as to mitigate the impact of the measure on those interests.’⁴⁹

The Panel – upheld by the Appellate Body - also regarded the highly trade restrictive importation and marketing ban as necessary, due to the consideration that the protection of public morals is of highest importance and that ‘[t]o the extent that such seal products are prohibited from the EU market, we find that the ban makes a material contribution to the objective of the measure’ ‘by reducing, to a certain extent, the global demand for seal products and by helping the EU public avoid being exposed to seal products … derived from seals killed inhumanely.’⁵⁰ Also, potential alternative less trade restrictive measures, namely labelling requirements certifying compliance with animal welfare standards, had been dismissed as they would not effectively address the moral concerns and pose significant difficulties in terms of monitoring and compliance.⁵¹

What remains is the so-called chapeau in Article XX, which provides for a safeguard that ‘such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade’ aims at ensuring that a trade restrictive measure which can invoke one of the exceptions is applied in ‘good faith’

and not misused for protectionist purposes. Often, the chapeau is used to address inconsistencies in the measure. In EC – Seal Products, the Appellate Body found inconsistencies with the exception of indigenous hunts which it held to amount to arbitrary or unjustifiable discrimination and thus not to meet the requirements of the chapeau. In particular, the exception did not address animal welfare issues of indigenous hunts and did not safeguard sufficiently that no commercial hunts could fall under the exception. Moreover, access of Canadian Inuit to the exception should be facilitated.⁵²

(c) Public morals and human rights and labour standards

Although EC – Seal Products dealt with animal welfare, its (potential) significance for CSR regulation, in particular human rights and labour standards, seems obvious. The relevance of the public moral exception in

48 EC – Seal Products, WT/DS/400/AB/R, WT/DS 401/AB/R, para. 5.200.

49 ibid., para 5.167.

50 EC – Seal Products, WT/DS/400/R, WT/DS 401/R, para. 7.637.

51 ibid., paras 7.496 ff. For detailed analysis, see Howse, Langille and Sykes, ‘Pluralism in Practice’ (n. 32).

52 EC – Seal Products, WT/DS/400/AB/R, WT/DS 401/AB/R, para. 5.337.

Article XX(a) for the protection of human rights and labour rights has always been highlighted by authors like Charnovitz who regarded internationally recognised human rights standards as a classical application of the concept,⁵³ or Trebilcock and Howse who state that a ‘conception of public morals or morality that excluded notions of fundamental rights would simply be contrary to the ordinary contemporary meaning of the concept’ and that Article XX(a) should thus ‘extend to universal human rights, including labor rights’.⁵⁴ This approach now seems, in principle, to be uncontested also with authors that are concerned about the trade restricting effect of CSR approaches: ‘If we agree that human rights are more important than animal welfare in our value scale, internationally recognized human rights norms and standards should definitely come within the scope of the “public morals”’.⁵⁵

Also, following EC – Seal Products, the extraterritoriality of protected subjects seems to no longer be an obstacle, at least for Article XX(a).

Although the Appellate Body did not address this issue fundamentally, the fact that the measure aimed at the protection of moral concerns of European citizens and consumers was regarded as sufficient.⁵⁶

The challenge now relates to striking the balance between the protection of extraterritorial concerns and its misuse as a ‘catch all justification’ for concerns that are otherwise (potentially) not permitted⁵⁷ or for protectionist purposes.⁵⁸

Indeed, Article XX provides for legal safeguards against the misuse of alleged CSR aims for protectionist purposes, namely the necessity to provide evidence for the high national value of the particular CSR concern, the necessity of the measure, and the chapeau.⁵⁹ Although EC – Seal Products dealt with a specific European concern which was neither established with reference to an internationally recognised standard nor

53 S. Charnovitz, ‘The Moral Exception in Trade Policy’ (1998) 38 Virginia Journal of International Law 689, 717 742.

54 Trebilcock and Howse (n. 45), at 290.

55 Du (n. 13), at 695. See also P. Serpin, ‘The Public Morals Exception after the WTO Seal Products Dispute: Has the Exception Swallowed the Rules?’ (2016) Columbia Business Law Review 217, at 245 ff.

56 Para 5.173. For detailed analysis, see Howse, Langille and Sykes, ‘Pluralism in Practice’

(n. 32), at 124 et seq., who argue that the measure is exactly concerned about the conduct of EU citizens and consumers who do not want to create a market for cruelly killed seals or become accomplices to these practices.

57 ‘[I]t is simply a shift from protecting foreign seals to EU citizens’ feelings about the seals’, see Du (n. 13), at 689.

58 ‘[W]hy couldn’t the US government claim that the US citizens have legitimate moral concerns on gender equality in Saudi Arabia, human rights in Myanmar and labour standards in China?’, see Du (n. 13), at 695.

59 See Serpin (n. 55).

necessarily consistent with (all) other animal treatment concerns,⁶⁰ for establishing a legitimate CSR concern, it might be helpful to refer to internationally recognised human rights or core labour standards⁶¹ and to pursue a consistent policy in this regard. Similar considerations would, in principle, apply for compliance with the Chapeau. Here, it would be of particular relevance whether a CSR measure does not target specific countries, as opposed to other countries where similar conditions exist.⁶² With regard to the element of necessity, it is noteworthy that the Panel and the Appellate Body both did not regard a labelling requirement as an alternative, less restrictive instrument; and this was not only because of monitoring and verification problems but also because a mere labelling requirement would not effectively meet the relevant moral concerns.⁶³ 2.2. THE TBTAGREEMENT

2.2.1. THE SCOPE OF APPLICATION

The TBT Agreement is applicable to ‘technical regulations’ and

‘standards’. A technical regulation is defined as a ‘[d]ocument which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method.’ As opposed to a technical regulation, compliance with a standard is voluntary.⁶⁴ Art. 2.1 TBT lays down most-favoured nation and national treatment requirements for like products that are, in principle, similar to those of the GATT.⁶⁵ Article 2.2 TBT prohibits technical regulations from being more trade restrictive than necessary to fulfil a legitimate objective which includes the prevention of deceptive practices, the protection of human

60 See Howse, Langille and Sykes, ‘Pluralism in Practice’ (n. 32), at 114 ff., who argue that the Appellate Body did not require philosophical consistency with other moral concerns;

at 117 ff., they also argue that the protection of public morals can less be addressed by international standards and principal and instrumental consistency.

61 See also Charnovitz (n. 53), at 742.

62 Trebilcock and Howse (n. 45), at 290; Howse, Langille and Sykes, ‘Pluralism in Practice’

(n. 32), at 117 ff.

63 See supra, 2.1.2. (b).

64 TBT Agreement, Annex I 1. A standard is defined in Annex I 2. as a ‘[d]ocument approved by a recognized body, that provides, for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is not mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method.’

65 See infra, 2.2.2., although the Appellate Body does regard the scope and content of these provisions not to be entirely identical, see e.g. Tuna Dolphin II, WT/DS381/AB/R, para. 405.

health or safety, animal or plant life or health, or the environment. The list is non-exhaustive. For example, the Appellate Body has also accepted consumer protection and fair competition as legitimate objectives.⁶⁶

(a) The discussion

Here, it had been discussed for long whether or not the TBT Agreement is applicable to (extraterritorial) production methods at all (or whether they fall under the GATT instead). The opponents of an inclusion of ‘nprPPMs’ into the TBT Agreement argued with the wording of Annex I 1., which refers to product characteristics or ‘their related’⁶⁷ processes and production methods whereas ‘related’ was interpreted as traceable within the physical characteristics of the concrete product. A subsequent question was whether labelling requirements would also have to relate to the physical characteristics of the product, as the second sentence of Annex I 1. does not explicitly contain this reference.⁶⁸

(b) The impact of Tuna Dolphin II

Tuna Dolphin II⁶⁹ dealt with US provisions which only allow the use of a ‘dolphin-safe’ label or any other form of description as ‘dolphin-safe’

for tuna caught in the Eastern Tropical Pacific Ocean (ETP) on the US market if dolphins are not intentionally chased, encircled or netted during an entire tuna fishing trip and if this is confirmed by an independent observer - thus with an extraterritorial fishing method. Neither the Panel nor the Appellate Body discussed a (potential) distinction between product related and non product related process and production methods at all. The Panel regarded the US labelling provisions as product related as they ‘apply to a product’ without even considering the fact that the label deals with ‘dolphin-safe’ fishing methods, which cannot be traced in the tuna (products).⁷⁰ This finding remained uncontested. The Appellate Body even regarded the US regulation as more encompassing than a mere labelling requirement, because it laid down comprehensively the use of the term ‘dolphin-safe’, and thus as a technical regulation within the meaning of the first sentence in Annex I.1. - again without even mentioning a

66 See European Communities – Trade Description of Sardines, WT/DS231/AB/R, para. 287.

67 Emphasis added by the author.

68 See e.g. Joshi (n. 12), at 74 f. with reference to the negotiation history of the agreement.

See also S. Puth, WTO und Umwelt – Die Produkt-Prozess-Doktrin (Duncker & Humblot, 2003), at 217 ff.; C. Tietje, ‘Voluntary Eco-Labelling Programmes and Questions of State Responsibility in the WTO/GATT Legal System’ (1995) 29(5) Journal of World Trade 123, at 135. For deviating views see E. Vranes, Trade and the Environment, Fundamental Issues in International Law, WTO Law and Legal Theory (Oxford University Press, Oxford, 2009), at 319 ff., 342 ff.; C. Conrad, Process and Production Methods (PPMs) in WTO Law – Interfacing Trade and Social Goods (Cambridge University Press, Cambridge, 2011), at 385 ff.

69 United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, WT/DS381.

70 Tuna Dolphin II, WT/DS381/R, paras 7.71 ff.

potentially required relation to the physical characteristics of the product.⁷¹ It held that ‘the US measure prescribes in a broad and exhaustive manner the conditions that apply for making any assertion on a tuna product as to its "dolphin-safety", regardless of the manner in which that statement is made. As a consequence, the US measure covers the entire field of what

"dolphin-safe" means in relation to tuna products. For these reasons, we find that the Panel did not err in characterizing the measure at issue as a

"technical regulation" within the meaning of Annex 1.1 to the TBT Agreement.’⁷² Thus, according to that ruling, the TBT Agreement covers all (technical) product requirements, be they product related or production related.⁷³ Accordingly, authors have already claimed the ‘end of the PPM distinction’.⁷⁴

2.2.2. DISCRIMINATION OF ‘LIKE PRODUCTS’ UNDER THE TBT AGREEMENT

Similar considerations as under the GATT apply to the feasibility of a different treatment of ‘like products’ based upon different production methods under the TBT Agreement. As opposed to the latest ruling under the GATT in EC – Seal Products, however, the Appellate Body in Tuna Dolphin II followed the line of reasoning set up in US - Clove Cigarettes⁷⁵ that it takes two steps to define de facto discrimination. In addition to the question whether the measure modifies the conditions of competition, it must be established that the detrimental impact on competitive opportunities reflects discrimination. The latter translates into the question whether the measure pursues legitimate objectives and could be regarded as ‘calibrated’ and ‘even-handed’.⁷⁶ Again, the legitimacy of addressing fishing methods which adversely affect animals (dolphins) which are neither endangered nor present inside US territory was not questioned at all. However, the labelling requirement reduced competitive opportunities of Mexican tuna products considerably, because the Mexican fleet was still setting on dolphins in order to catch the tuna. The Panel had found that it was not the US measure as such, which made it impossible or difficult for Mexican tuna producers to comply with, but the persisting fishing and purchasing choices of the Mexican producers

71 Tuna Dolphin II, WT/DS381/AB/R, paras 190 ff.

72 ibid., para 199.

73 For detailed analysis, see R. Howse and M.A. Crowley, ‘Tuna-Dolphin II: a legal end economic analysis of the Appellate Body Report’ (2014) 13 World Trade Review 321, at 325 ff.

74 J. Pauwelyn, ‘Tuna: The End of the PPM distinction? The Rise of International Standards?’, <worldtradelaw.typepad.com/ielpblog> accessed 29 May 2017.

75 US - Clove Cigarettes, WT/DS/406/AB/R, para 161 et seq.

76 Tuna Dolphin II, WT/DS381/AB/R, para. 215: ‘whether that technical regulation is

76 Tuna Dolphin II, WT/DS381/AB/R, para. 215: ‘whether that technical regulation is

In document CSR and the Law of the WTO – The Impact of Tuna Dolphin II and EC–Seal Products (Sider 11-0)